The Implications of a Heating World

Climate change in 2050: the implications of a heating world

Climate change is the defining issue of our time and generation. It refers to the long-term rise in the earth’s overall temperature, and is having profound and potentially permanent impacts on the world we live in.

It is caused by human activities which emit greenhouse gases such as carbon dioxide and methane into the atmosphere. As these gases build up in our atmosphere, our planet is warming up just like a greenhouse.

According to NASA, over the last 20 years, 19 have been the warmest ever recorded, with the trend continuing to gather pace. Here we identify several areas that are prone to the risk and picture a world in 2050 if no efforts are taken to address climate change – one of, if not the greatest, threats to businesses, society and the long-term financial return for investors.

The places where we live and work

Climate shifts like heat waves could restrict the ability of people to work outdoor, and, in extreme cases, put their lives at risk. Under a 2050 climate scenario developed by NASA, continuing growth of the greenhouse emission at today’s rate could lead to additional global warming of about 1.5 degrees Celsius by 2050. [1] People will likely be forced to work indoors or to take frequent breaks to prevent heatstroke, while extreme hot weather could also lead to changes in the disease vectors which ultimately impact human health.

2. Food production

A changing climate is likely to both improve and degrade the performance of food systems. Some regions may become more productive under a warming climate, whilst others may see a significant drop in food production. A McKinsey study [2] found that by 2050 while soy would benefit from higher temperatures, rice and wheat could become increasingly volatile. In another scenario analysis, it is estimated that by 2050, food production will be inadequate to feed the growing global population because of one-fifth decline in crop yields. [3] It is clear that the food production will be heavily impacted by climate change.

3. Infrastructure assets

Extreme hot weather could significantly lower the efficiency of the power systems around the world. According to McKinsey, up to 185,000 airline passengers per year may be grounded due to extreme heat (48 degrees Celsius), approximately 23 times more than today. [4] Other extreme weather events like hurricanes will likely impact infrastructure that serves both individuals and corporates.

4. Physical assets

Physical assets in general are highly exposed to climate risks. For example, offshore structures and transportation systems are exposed to variability in ambient environmental conditions, whilst excessive flooding or forest fires may damage or even destroy buildings. It is projected that the

amount of physical capital that could be damaged as a result of riverine flooding by 2050 will rise to US$1.6 trillion globally and US$1.2 trillion in Asia.[5]

5. Natural capital

Natural systems are prone to significant risks as climate change is worsening, which could further exacerbate existing challenges such as water scarcity. It’s projected that by 2050, glacial loss will reach 70 percent in the Andes; the summer monsoons in China will fail, and water flows into the great rivers of Asia will be severely reduced by the loss of more than one-third of the Himalayan ice sheet. [6]

6. Outdoor air quality

By 2050, outdoor air pollution particulate matter and ground-level ozone is projected to become the top cause of environmentally related deaths worldwide. [7] A study showed that with no change in emissions by 2050, 1,126,000 premature mortalities are expected each year due to ozone [8].

7. Precipitation risks

Precipitation extremes, such as heavy rainfalls and droughts are becoming far more frequent and intense in some regions. According to a McKinsey report, the likelihood of extreme precipitation events could increase three or fourfold by 2050 in Asian regions. [9]

8. Water management

Water utility operation is another area that is subject to climate risks, which threatens to affect water quality in rivers, lakes, and streams. By 2050, more than half of the global population (57%) will live in areas that suffer water scarcity at least one month each year. [10]

9. Waste management

The World Bank estimates global waste will grow by 70 percent by 2050 as urbanisation and populations rise [11], requiring better collecting, recycling of trash, as well as expertise clean-up efforts from public and private sectors.

10. Public health

A rise in temperature could pose a serious threat to public health as it affects the quality of drinking water and the way chemicals and debris are disposed of. The World Health Organisation projects that between 2030 and 2050, climate change impacts will cause 250,000 more deaths globally each year, mainly from malnutrition, malaria, diarrhoea, and heat stress. [12]

For investors focused on sustainability, 2021 was a year dominated by the runup to and takeaways from November’s COP26 climate change negotiations in Glasgow, Scotland.

But the true test is just beginning now: What actions will countries take to deliver on their pledges, not only in terms of emission cuts but in preserving our biological diversity and ensuring a fair and equitable transition to a low carbon world? As we head into 2022, we see three big themes coming into greater focus: deforestation, the just transition, and double materiality.

Join Fidelity’s experts at their “ESG themes for 2022” webinar as they delve into these themes and what they mean for investors.

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[1]. Source: NASA, 2019.